Finding Text
Finding: 2022-001 Inaccurate SEFA reporting Name of Federal agency: Federal Transit Administration Name of applicable pass-through entity: Not applicable Federal program: Federal Transit Cluster: COVID-19 ? Federal Transit Formula Grants and State of Good Repair Grants; Public Transportation Emergency Relief Program Assistance listing number: 20.507, 20.525 and 20.527 Federal Award Number(s): AK-2022-005-00, AK-2022-002-00, AK-2023-004-00, and AK-2023-003-00 Federal award year: January 1, 2022 ? December 31, 2022 Condition Found: The Corporation did not have adequate controls relating to the reporting of expenditures for the Federal Transit Administration grants in the schedule of expenditures of federal awards. Specifically, the amounts reported in the schedule of expenditures of federal awards for this program that was originally provided to the auditors did not include $9,374,427 of expenditures that had been previously reported and the schedule incorrectly included $3,333,684 of expenditures that should have been included in the subsequent year?s SEFA, based on the award dates of these grants. As a result of these errors, there was no change in the major programs subject to testing. Criteria: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity?s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately reported on the SEFA and information provided for audit purposes is complete and accurate. Cause: In discussing these conditions with the Corporation, they stated that the Corporation consistently followed a policy to report expenditures when expenditures are incurred and the award is granted prior to the SEFA drafting. Management did not have a control in place to review new implementation guides which clarified how the award timing impacted the SEFA reporting timing and update their long-standing policy accordingly.Possible Asserted Effect: Failure to establish effective internal controls regarding financial reporting for the preparation of the SEFA may result in incorrect major program determination. Repeat Finding: A similar finding was not reported in the prior year audit. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend the Corporation establish internal controls to ensure Federal Transit Administration expenditures are accurately reported on the SEFA and information provided for audit purposes is complete and accurate. Views of Responsible Officials: Management agrees with the finding. Management will implement additional controls to ensure the completeness and accuracy of amounts reported for expenditures of the Federal Transit Administration grants in the schedule of federal awards. These additional controls include the annual review of new implementation guides.